The cumulative deficit is obtained by summing all yearly govt deficits (= negative net_worths) after correcting for inflation using the GDP inflation factors published by Bureau of Economic Analysis. This cumulative sum is on the order of ten times the yearly deficit. For 2011 the deficit is 8746.2 billion and the cumulative deficit is 87120.5 billion in 2005 dollars. And the cumulated external account is $31788.4 in billion in 2005 dollars. The excel sheet S.7.a. Federal Govt says that many things are not counted in this sheet. The net worth of the govt sector is the entry FL312090095 in sheet A007 Ann. The net worth external is FL262090095 and is given in A009 Ann, S. 9 a. Rest of the world which is the external account.

Note. The Federal government accounts exclude Federal employee retirement funds (1) Government-sponsored enterprises (GSEs) consist of Federal Home Loan Banks, Fannie Mae, Freddie Mac, Federal Agricultural Mortgage Corporation, Farm Credit System, the Financing Corporation, and the Resolution Funding Corporation, and they included the Student Loan Marketing Association until it was fully privatized in the fourth quarter of 2004. (2) The statistical discrepancy is the difference between net lending or net borrowing derived in the capital account and the same concept derived in the financial account. The discrepancy reflects differences in source data, timing of recorded flows, and other statistical differences between the capital and financial accounts.(3) Excludes land and non-produced non-financial assets and IMF International Monetary Fund.

The GDP inflation factor is 100% at year 2005 and decreases to 23% in 1969. Because I am using data from 1960 to 2011, I am setting this factor to 20% from 1960 to 1968. This can be corrected later. The yearly adjusted numbers are given by

(100/factor )* FL312090095 etc., in 2005 dollars.

The cumulative values are obtained by the running total of yearly values. Net worth household is already cumulative. The govt net worth and external are summed as indicated.

Peoples’ wealth is defined as the net worth of household and nonprofit sectors of the economy (FL152090005 in sheet A003). In the USA, the figure regularly reported by the Federal Reserve of the US is household net worth, and includes corporations as they are essentially owned by American households.(?) from http://en.wikipedia.org/wiki/National_wealth

This includes foreign deposits, ownership of corporate and foreign bonds, real estate, financial assets, and mortgages.

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I have read your posts and they are intriguing, if hard to follow, to an economics novice like myself.

The theories you are promoting sound based on monetarily sovereign nations printing their own money to reduce federal debt, essentially devaluing the amount of money they owe and repeating a cycle of spending, printing, and taxation that never fully catches up to the debt since it is basically a fictional amount of money owed.

This is not sound for 2 reasons: 1) Even the various writers put in the disclaimer that this does NOT include interest on debt 2) The United Stated federal debt is NO LONGER simply owed to the monetarily sovereign nation producing its money: the United States. We have engaged in massive borrowing from foreign nations like China that do not tie the value of their own currency to ours.

We cannot continue to reduce our federal debt by devaluing our own currency when large amounts of that debt is owed to a foreign government. That debt is inescapable and must be serviced to maintain the fundamental principle required for all modern economic exchanges: Faith in credit. It is no small coincidence that devalued currency is the root of trade imbalance animosity towards China.

For most “deficit hawks” there is a belief that reducing the level of federal debt will have the positive effect of drawing additional foreign money into our economy over the long run. This is a long term economic benefit to reducing the federal deficit, not a practical approach to solving our immediate woes. This is supported by the article I linked on the Huffington Post regarding the US Credit rating being threatened by Moody’s. For all the discussion of deficit spending being perpetual it seems there are some that take this matter very seriously and they just happen to be the same people that can directly impact the price of running our economy in the global market.

Possibly more important is the issue of freedom.
One thing economists miss when discussing federal deficits is that most people concerned with the debt are not seeking to turn the economy around. The principles of our Republic dictate that our citizens should not be burdened with what some apparently frame as “personal profit” and nobody should therefore be forced to engage in economic activity they have no desire to participate in.

Whether the economics of federal deficits are gainful to some or many, forcing citizens to contribute a larger portion of their prosperity to the Federal government runs counter to the individual freedoms we aspire to in this country. These taxes are no longer derived from the cost of operating a government but from maintaining an elaborate economic shell game.

The argument for reducing the federal debt is misconstrued by many as purely economic. The 1% understand, while the 99% do not and suffer thusly because of their ignorance. That is a bunk theory through and through.

The truth is deficit hawks are just as focused on the economics of federal deficit spending as the security threat it poses as the federal government goes outside our borders to borrow money.

While printed money may have no intrinsic value and the relative value fluctuates, the private sector ultimately defines the “value” of anything. From what I read of the theories you are citing it seems most ignore that people will set values for things they produce, need or desire right down to the value of the time spent to be productive going beyond money if needed.

Therefore, stating that a monetarily sovereign nation has an unlimited ability to spend is factually incorrect. If, when taxes are collected people feel they are not seeing a proper ratio of value to production, they will eliminate the entity attempting to devalue said production.

These ideas you are cite will lead ultimately to revolution due to the civil unrest that delaying austerity currently seeks to avoid. The producers are finite and eventually cast off those wishing to tap into their production for so little return.

This cycle has shown itself to be more reliable than any economic theory to date.

{Issue 1:Even the various writers put in the disclaimer that this does NOT include interest on debt….
In showing
The Cumulative Deficit = Household Net worth,
interest is included because BEA spreadsheets do.}
{Issue 2: Does USA have a lot of Foreign Currency Debt?
In http://www.rooseveltinstitute.org/new-roosevelt/should-america-kowtow-china
with title “Do the Chinese really fund our deficit? Or is this more Neo-classical money mythology?”
“This claim is seldom challenged, but our friend, Warren Mosler, recently gave an excellent illustration of this fact in an interview with Mike Norman. Mosler provides a hypothetical example in which China decides to sell us a billion dollars’ worth of T-shirts. We buy a billion dollars’ worth of T-shirts from China:
“And the way we pay them is somebody pays China. And the money goes into their checking account at the Federal Reserve. Now, it’s called a reserve account because it’s the Federal Reserve, and they give it a fancy name. But it’s a checking account. So we get the T-shirts, and China gets $1 billion in their checking account. And that’s just a data entry. That’s just a one and some zeros.
Whoever bought them gets a debit. You know, it might have been Disneyland or something. So we debit Disney’s account and then we credit China’s account.
In this situation, we’ve increased our trade deficit by $1 billion. But it’s not an imbalance. China would rather have the money than the T-shirts, or they wouldn’t have sent them. It’s voluntary. We’d rather have the T-shirts than the money, or we wouldn’t have bought them. It’s voluntary.”
So, when you just look at the numbers and say there’s a trade deficit, and it’s an imbalance, that’s not correct. That’s imbalance. It’s markets. That’s where all market participants are happy. Markets are cleared at that price.

Okay, so now China has two choices with what they can do with the money in their checking account. They could spend it, in which case we wouldn’t have a trade deficit, or they can put it in another account at the Federal Reserve called a Treasury security, which is nothing more than a savings account. You give them money, you get it back with interest. If it’s a bank, you give them money, you get it back with interest. That’s what a savings account is.
The example here clearly illustrates that bonds are a savings alternative which we offer to the Chinese manufacturer, not something which actually “funds” our government’s spending choices.”
USA is not borrowing money from China.}
We cannot continue to reduce our federal debt by devaluing our own currency when large amounts of that debt is owed to a foreign government. That debt is inescapable and must be serviced to maintain the fundamental principle required for all modern economic exchanges: Faith in credit. It is no small coincidence that devalued currency is the root of trade imbalance animosity towards China.
We will consider your other points later.

We cannot continue to reduce our federal debt by devaluing our own currency when large amounts of that debt is owed to a foreign government. That debt is inescapable and must be serviced to maintain the fundamental principle required for all modern economic exchanges: Faith in credit. It is no small coincidence that devalued currency is the root of trade imbalance animosity towards China.

For most “deficit hawks” there is a belief that reducing the level of federal debt will have the positive effect of drawing additional foreign money into our economy over the long run. This is a long term economic benefit to reducing the federal deficit, not a practical approach to solving our immediate woes. This is supported by the article I linked on the Huffington Post regarding the US Credit rating being threatened by Moody’s.
{ http://www.correntewire.com/alan_graysons_right_but_he_misses_the_larger_point#more
In this URL, letsgetitdone’s blog, he says “First, as is widely known, all the ratings agencies including Moody’s gave the CDOs and CDSs that led to the collapse of AIG their highest AAA ratings. In addition, they downgraded Japan’s credit ratings a long time ago, with no measurable impact on its bond interest rates or costs, even though Japan’s debt-to-GDP ratio has continued to increase over time and is now in the neighborhood of 200%. More recently, in April of 2011, & P downgrade”>Standard & Poor’s downgraded the outlook on US debt from stable to negative. What happened thereafter? There was a flight to Treasuries on the International markets and interest rates have fallen more than 1% since S & P delivered its downgrade.” And “As Bill Mitchell says in his post on outlawing the credit rating agencies:
“The real question that I always ask is why governments allow these undemocratic criminal organisations to exist. They can just outlaw them. This would force the corporate players to create better ways of informing the markets about their risk characteristics and leave governments alone to do what they are democratically elected to do – advance public purpose.
Further. as part of my preferred financial market reforms I would render illegal a whole swag of derivative assets which would lessen the problem of pricing risk.
It is time to wean the private financial markets off these agencies. The best way would be to declare them illegal.… . ”
For all the discussion of deficit spending being perpetual it seems there are some that take this matter very seriously and they just happen to be the same people that can directly impact the price of running our economy in the global market.
Possibly more important is the issue of freedom.

One thing economists miss when discussing federal deficits is that most people concerned with the debt are not seeking to turn the economy around. The principles of our Republic dictate that our citizens should not be burdened with what some apparently frame as “personal profit” and nobody should therefore be forced to engage in economic activity they have no desire to participate in.
{Nobody is being forced to engage in economic activity they have no desire to participate in. Give me a specific example to clarify what you mean.}
Whether the economics of federal deficits are gainful to some or many, forcing citizens to contribute a larger portion of their prosperity to the Federal government runs counter to the individual freedoms we aspire to in this country. These taxes are no longer derived from the cost of operating a government but from maintaining an elaborate economic shell game.
{ I agree that taxes are not necessary for a monetarily sovereign govt. The only use of taxes is to modify income inequality, a desirable social goal.}
Even Mitchell advocates ending Federal taxation and promotes higher interest rates.
The argument for reducing the federal debt is misconstrued by many as purely economic. The 1% understand, while the 99% do not and suffer thusly because of their ignorance. That is a bunk theory through and through.
{The argument for reducing federal debt is wrong algebra. Govt debt is the opposite of private sector debt.}
The truth is deficit hawks are just as focused on the economics of federal deficit spending as the security threat it poses as the federal government goes outside our borders to borrow money.
While printed money may have no intrinsic value and the relative value fluctuates, the private sector ultimately defines the “value” of anything. From what I read of the theories you are citing it seems most ignore that people will set values for things they produce, need or desire right down to the value of the time spent to be productive going beyond money if needed.
{How do you explain sum of all deficits = gross national wealth? It is a fact, independent of any theory.}
Therefore, stating that a monetarily sovereign nation has an unlimited ability to spend is factually incorrect. If, when taxes are collected people feel they are not seeing a proper ratio of value to production, they will eliminate the entity attempting to devalue said production.
{deficits do not relate to inflation (currency devaluation) as data shows inhttp://rodgermmitchell.wordpress.com/2009/09/07/introduction/
}
These ideas you are cite will lead ultimately to revolution due to the civil unrest that delaying austerity currently seeks to avoid. The producers are finite and eventually cast off those wishing to tap into their production for so little return.
{Austerity does not correspond with algebra. Which is why Mitchell’s blogs have this in the end
“Cutting federal deficits to grow the economy is like applying leeches to cure anemia.”}
This cycle has shown itself to be more reliable than any economic theory to date.
{Bill Mitchell considers a system model in “Introducing economics dynamics” inhttp://bilbo.economicoutlook.net/blog/?p=20509
and says “This was the basic insight that underpinned the Harrod-Domar model of economic cycles (and growth) and supports the notion developed by Keynes that we considered in Chapters 10 and 11 on the labour market, that the economy has no natural full employment level that it gravitates towards.
In those chapters, we learned that because the capitalist economy is prone to under-full employment equilibrium positions which have to be disturbed by government policy stimulus.”
The system does not have a natural equilibrium state and constant adjustments are required.}